"In case of Demerger no concession or incentive provided to resulting company." Discuss briefly the validity of the above statement.

The statement is incorrect. However, the resulting company shall be eligible for tax concessions only if the following two conditions are satisfied: The demerger satisfies all the conditions laid down in section 2(19AA); and The resulting company is an Indian company. The following concessions are available to the resulting company pursuant to a scheme of demerger: i. Expenditure for obtaining a licence to Operate Telecommunication Services [Section 35ABB (7)]: Where in a scheme of demerger, the demerged company sells or otherwise transfers its licence to the resulting company (being an Indian company), the provisions of section 35ABB which were applicable to the demerged company shall become applicable in the same manner to the resulting company, consequently: The expenditure on the acquisition of the licence, not yet written off, shall be allowed to the resulting company in the same number of balance instalments. Where such licence is sold by the resulting company, the treatment of the deficiency/ surplus will be the same as would have been in the case of demerged company. ii. Treatment of preliminary expenses [Section 35D(5A)]: Where the undertaking of an Indian company which is entitled to a deduction of preliminary expenses is transferred before the expiry of 10 years/5 years, as the case may be, to another company in a scheme of demerger, the preliminary expenses of a such undertaking which are not yet written off shall be allowed as a deduction to the resulting company in the same manner as would have been allowed to the demerged company. The demerged company will not be entitled to the deduction thereafter. iii. Treatment of expenditure on prospecting, etc. of certain minerals [Section 35E (7A)]: Where the undertaking of an Indian company which is entitled to a deduction on account of prospecting of minerals, is transferred before the expiry of the period of 10 years to another Indian company in a scheme of demerger, such expenditure of prospecting, etc. which is not yet written off shall be allowed as a deduction to the resulting company in the same manner as would have been allowed to the demerged company. The demerged company will not be entitled to the deduction thereafter. iv. Treatment of bad debts [Section 36(1) (vii)]: Where due to demerger, the debts of the demerged company have been taken over by the resulting company and subsequently by such debt or part of debt becomes bad as per ICDS, such bad debt will be allowed as a deduction to the resulting company. v. Amortization of expenditure in case of demerger [Section 35DD]: According to sub-section 1 where an assessee, being an Indian company, incurs any expenditure, on or after 1-4-1999, wholly and exclusively for the purposes of demerger of an undertaking, the assessee shall be allowed a deduction of an amount equal to one-fifth of such expenditure for each of the five successive previous years beginning with the previous year in which the demerger takes place. No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of the Income tax Act. vi. Carry forward and set off of business losses and unabsorbed depreciation of the demerged company [Section 72A (4) & (5)]: The accumulated loss and unabsorbed depreciation, in a demerger, should be allowed to be carried forward by the resulting company if these are directly relatable to the undertaking proposed to be transferred. Where it is not possible to relate these to the undertaking, such loss and depreciation shall be apportioned between the demerged company and the resulting company in the proportion of the assets coming to the share of each as a result of the demerger. vii. Deduction available under section 80-IAB or 80-IB or 80-IC or 80-IE: Where an undertaking which is entitled to deduction under section 80-IAB/80-IB/80-IC/80-IE is transferred in the scheme of demerger before the expiry of the period of deduction under section 80-IAB/80-IB/80-IC/80-IE, then- No deduction under section 80-IAB/80-IB/80-IC/80-IE shall be available to the demerged company for the previous year in which amalgamation takes place; and the provisions of section 80-IAB/80-IB/80-IC/80-IE shall apply to the resulting company in such manner in which they would have applied to the demerged company of values to individual assets or liabilities.